Gibraltar, famous for being a tax haven, is on track to become a major cryptocurrency hub next year, as the territory prepares for a financial industry overhaul.
The Gibraltar-based blockchain business Valereum is going to purchase the Gibraltar Stock Exchange (GSX) in order to transform it into the world’s first integrated bourse, listing both traditional bonds and leading cryptocurrencies such as Bitcoin.
Is it a cryptocurrency powerhouse or a tax haven?
However, there are a lot of barriers in the way of this British Overseas Territory, one of which is its insignificant regulatory agency. Because of its small size, this action is more more significant, as it might result in the enclave being a worldwide crypto centre or being ostracized by the international community as a sanctuary for financial crimes.
While Gibraltar has been actively regulating its cryptocurrency sector in recent years, this latest action comes at a time when the country is still battling to lose its global reputation as a tax haven due to the tax breaks it offers to offshore corporations. It was only recently that it was removed from the list of non-cooperating states maintained by its neighbour Spain. This was done to guarantee that the territory adheres to EU-level legislation regarding tax transparency and works to combat financial crime.
Albert Isola, Gibraltar’s minister for digital, financial services, and public utilities, emphasized the same point, stating that the territory has now overhauled its tax and information sharing policies, and that regulating the crypto industry was having a similar effect in rooting out bad actors and protecting investors.
“I don’t see how there can be any greater risk in Gibraltar when you can go to any other European country today and do the same business without being supervised, licensed, or regulated.”
Valereum Chairman Richard Poulden expressed similar sentiments, noting that regulating an exchange with only three personnel will necessitate the use of technology rather than people. He added that executing anti-money laundering checks on both cryptocurrency and traditional currency would necessitate a comparable mechanism.
“In fact, because you can go back through the blockchain and see precisely where that money has come from, it can actually be significantly easier than attempting to determine where a block of monies in a bank has originated from in some circumstances.”
A significant redesign is in the works.
Another unfavorable outcome would be Gibraltar’s likely designation as the new crypto haven, where people would flee “to avoid actual regulators.”
Over the last three years, fourteen crypto businesses have won regulatory license in the zone known as the “blockchain rock.” Furthermore, its government has opted to incorporate blockchain technology into its administration systems in order to improve the delivery of public services in the region.
Regardless of the optimism, changing the GSX would necessitate extensive regulation changes and could prove to be a major risk for the small region. The legal licensing of crypto businesses that unintentionally host money launderers, terrorism funders, fugitives, and other financial criminals using cryptocurrencies may result in sanctions imposed on Gibraltar by countries such as the United States.
The Financial Action Task Force, the world’s money laundering and terrorism financing watchdog, might also display similar wrath. The authority’s greylisting might devastate the territory’s economy since member nations would be forced to cut off business connections.